Benchmarks Showed Signs Of Stabilization Overnight After Tuesday's Rocky Close

March 24, 2021 10:15 AM
Fears were exacerbated when Germany extended their announced lockdown to April 18th
Much better-than-expected Flash PMI reads in Europe provided a boost to risk assets
The Dollar Index surged on yesterday’s safe haven bid, hitting the highest level since November overnight
Equity Index futures

Equity Index futures

Wednesday's Close

E-mini S&P 500 Futures (June): Settled at 3899.75, down 30.25

E-mini Nasdaq-100 Futures (June): Settled at 13,006.25, down 65.50

U.S. benchmarks finished poorly on Tuesday but have shown signs of stabilizing overnight. 

Like Monday, rally attempts in the S&P and Nasdaq were deflected by strong levels of technical resistance. From there, each bled slowly leading up to the final hour. At that time, gauges of the broader risk appetite, such as the Russell 2000 and Crude Oil, were already down sharply due to lockdown announcements across Europe and worries of reopenings being paused in the U.S. They finished down 3.6% and 6.2%, respectively. 

Big Tech and the Work-From-Home trade were performing well for much of the day, but the slow bleed pressured just about everything into the close. Germany had initially announced a 5-day lockdown over the Easter holiday, but fears were exacerbated when they extended that to April 18th during U.S. trading hours. 

The picture turned brighter early this morning upon the release of Flash PMI data in Europe. Much better-than-expected reads across the board provided a boost to risk assets. German Manufacturing was 66.6 versus 60.8 and the overall Eurozone read was 62.4 versus 57.7. Germany avoided a contraction in the Services sector for the 1st time since September and Eurozone Services PMI contracted less than expected at 48.8 versus 46.0. 

Although the lockdown news certainly weighed on sentiment, this PMI data was an offset; economic activity will be reduced from a better level. 

U.S. Durable Goods data was released at 8:30 a.m. CT, Flash PMIs followed at 8:45 a.m. CT, and Fed Chair Jerome Powell & Treasury Secretary Janet Yellen face their 2nd day of Congressional testimony beginning at 9:00 a.m. CT. The U.S. Dollar is in focus: the Dollar Index surged on yesterday’s safe haven bid, hitting the highest level since November overnight.

In the coming days, you’ll hear more about the 7-day average of Covid-19 cases and deaths in the U.S. This should prove to be a barometer of the risk appetite and a turn lower will lift the reopening trade.

The Semiconductor space finished down more than 2.5% yesterday, but news from Intel after the bell brought a relief rally. The company announced its plan to invest $20 billion to build 2 new manufacturing plants in Arizona and said sales should fall less than feared this year. This reasserts the company as a leader within the industry and has provided a jolt to the space ahead of the bell. 

In other news, Elon Musk tweeted, “You can now buy a Tesla with Bitcoin” and Bitcoin surged more than 6% overnight. There’s truth to strength in Bitcoin bringing support to the Nasdaq, especially now that companies within the index hold it in their reserves.

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